Federal Grant & Contract News for Nonprofits - August 2013

In late July, Northwestern University agreed to settle for nearly $3 million in an Illinois whistleblower lawsuit that accused one of its former researchers of misusing funds from the National Institute of Health (NIH). According to the U.S. Department of Justice, the NIH grants were supposed to fund research into adverse drug reactions, drugs for the blood cancer multiple myeloma, quality of care issues for cancer patients, and a blood-clotting disorder. Instead, the researcher allegedly used the funds for personal use, such as paying for family trips, food, and hotels for himself and his friends, as well as fraudulent consulting agreements with unqualified family members and friends.

On August 21, 2013, a federal judge rejected the defendants' motion to dismiss a qui tam complaint alleging that two nonprofits lied to secure more than $600 million in government contracts even though the relator (whistleblower) - a former employee - was informed that his complaint did not sufficiently specify its allegations with particularity. Rather than dismiss the complaint, the judge granted the plaintiff leave to amend his complaint - an unusual approach for FCA cases. According to court documents, the suit focuses on the operations of the Laogai Research Foundation and the China Information Center, two nongovernmental organizations raising awareness about China's forced-labor prison camps and creating a media outlet free from censorship by Chinese authorities, respectively. The complaint alleges that the organizations, their founder, and others provided the U.S. Department of State with false information about employees' backgrounds and spent grant money on prohibited lobbying efforts. While the case remains pending, it demonstrates some courts' willingness to allow FCA cases that are insufficiently pled to continue. The case, before the U.S. District Court for the District of Columbia, is Si v. Laogai Research Foundation et al., No. 1:09-cv-02388.

Federal FCA Legislation

In late July, Representatives Howard Coble (R-NC) and David Scott(D-GA), introduced bipartisan legislation that would amend the FCA by creating a new procedural step before federal authorities could open an investigation into suspected Medicare and Medicaid fraud. In particular...